Short answer: a refund advance is a loan based on your expected tax refund, offered by some tax preparers and repaid from the refund. A refund transfer, also called a refund anticipation check, lets the preparer take its fees out of your refund instead of you paying them up front, and the CFPB says it typically costs $30 to $50 (CFPB). For an e-filed return, the IRS gives a typical refund time of 3 weeks (IRS). If you can wait, you skip these costs.
The products, side by side
| What it is | How it is paid | Watch for | |
|---|---|---|---|
| Refund advance | A loan for part of your expected refund, when you file | The preparer takes it out of your refund | If the refund is less than the loan, or does not come, you still owe it (CFPB) |
| Refund transfer (refund anticipation check) | A way to pay preparation fees from the refund instead of up front | Prep fees and the transfer fee come out before you get the rest | A fee of $30 to $50 is typical (CFPB) |
| Prepaid refund card | Your refund loaded onto a card | No repayment | Card fees vary, including out-of-network ATM fees (CFPB) |
| Personal loan | Credit not tied to your refund | Monthly payments | APR and total of payments on the disclosure |
The CFPB adds that fees and terms for refund advances vary greatly, and that the preparer's fee for doing your return is separate from the advance (CFPB). Ask for the fee in writing before you agree.
What waiting costs vs paying a fee
Assumptions: a tax preparation fee of $200.00 paid from your refund with a refund transfer, and the refund arriving 21 days after you file. The prep fee is an example; the transfer fees are the CFPB's typical range. APR = fee / amount x 365 / days, our math.
| Transfer fee | Prep fee it lets you put off | For | As an APR |
|---|---|---|---|
| $30.00 | $200.00 | 21 days | 261% |
| $50.00 | $200.00 | 21 days | 435% |
This is not a loan rate; it shows what you pay to put off a $200.00 bill for three weeks. By comparison, interest on $500 for one month at 36% APR is $500 x 36% / 12 = $15.00; that rate is an example, not a quote.
Timing: when the refund arrives
- The IRS lists a typical refund time of 3 weeks from the date you e-file (IRS).
- By law, the IRS cannot issue refunds on returns that claim the earned income tax credit or the additional child tax credit before mid-February, and this holds the whole refund, not only the credit (IRS).
- Direct deposit to your own bank or credit union account is an option even if you use a refund product (CFPB).
Cheaper ways to file
- Many taxpayers qualify for free help from IRS-certified volunteers such as IRS VITA or AARP Tax-Aide (CFPB).
- If you pay a preparer, ask for every fee in writing, and check that they sign the return with their Preparer Tax Identification Number.
- A problem with a refund advance, refund check or prepaid card can be reported to the CFPB; see how to file a loan complaint.
If you need money before the refund and decide to borrow, compare offers by APR and total of payments (how to read a loan disclosure), and look at credit union payday alternative loans before a payday loan.
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Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.